In what many may see as a very disturbing development, new data from the UK government’s English Housing Survey has confirmed a very worrying trend. For the first time in 10 years the number of households renting property in London is greater than the number of households living in mortgaged property. When you bear in mind that London is the hub of employment in the UK, is home to the largest financial market in the world, this is a very challenging development for the UK government.
We now need to look at what the authorities can do to rebalance the London property market which is obviously attracting more investors than it is first-time buyers and genuine homeowners.
The figures
There are now 890,000 households in London living in private rented accommodation with the number of mortgaged properties standing at 883,000. The private rental figure has nearly doubled since 2004 while the number of mortgaged properties is down by 17% from a decade ago. There is no doubt that the main issue here is affordability and the fact that property prices in London are increasing faster than wages. This is creating a growing gap between property prices and affordable mortgages which is thereby pushing more and more households into the rental market.
The fact that property prices in London increased by 9% over the last year perfectly illustrates this with minimal wage rises due to the economic challenges of the day.
More new builds required
Like many property related websites the subject of “new builds” is never far from the headlines because politicians time and time again have failed to deliver. There is a genuine need for a gigantic shift in housing policy from the government of the day although it will be challenging to even catch up with the current shortfall let alone increase the required numbers in the longer term. You have to ask yourself whether politicians actually have an appetite for increasing the number of new builds as this would obviously reduce the pressure on house prices and impact individual wealth.
Underused housing
There is also one other issue which is coming to the fore more and more in the shape of underused housing with many bedrooms left unoccupied in larger properties. This is a very tricky situation because in essence what can the government do in a free market?
Many of the left-wing politicians would be in favour of increased taxes for privately owned properties which are not fully utilised. This may go down well with socialist/left wing leaning political parties but at the end of the day it would not send the right signals to the UK property market. Even though politicians like to focus upon the wealth associated with the UK property market it is also worth noting that it supports a massive number of jobs.
The future
At this moment in time it is difficult to see any short to medium term change in the trend of growing private property numbers against falling private ownership figures. The affordability factor, especially for first-time buyers, is already stretch beyond breaking point especially when you bear in mind the large deposits now required to purchase property. The situation could be rectified by increased new builds (assuming there is sufficient space) or an increase in wages and a slowdown in property price rises. Will any of these combinations actually come into play in the short term?